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Most SMB Merchants Offer Free Shipping, But Few Offer Fast

While two-thirds of small-to-medium-sized ecommerce companies offer free shipping, only 3% of them are offering same-day or next-day shipping, as the economics don’t work for smaller online merchants, according to a new survey by Shippo.

One-third of respondents said they always offer free shipping, while another one-third do so as part of a promotion strategy. Twenty-nine percent said they don’t offer any free shipping options, making competition with larger companies difficult as the practice has become table stakes, although this was a drop from 40% in 2016.

For the purposes of the survey of 200 U.S. businesses, Shippo defined an SMB ecommerce company as one shipping anywhere from 100 to 5,000 packages per month.

The most prevalent shipping speed by ecommerce SMBs, according to the Shippo survey, is two- to three-day service, offered by 53% of respondents, followed by four- to seven-day service, cited by 44% of companies.

In terms of returns, which can exceed 30% of online orders or even 40% in the case of apparel, just 17% of companies in the Shippo survey cover the cost of returns, with another 5% providing a discounted return label. Yet more than half of respondents – 56% – said they don’t provide any return assistance for customers, not the greatest experience or loyalty-builder.

“While the outgoing shipping process has become increasingly streamlined among businesses of all sizes, an expectation set by Amazon, there has not been any established benchmark around returns,” said Johnson Ma, Vice President of Growth for Shippo. “There is a perception among SMBs that owning the returns process would be cost-prohibitive to them.”

Based on the UPS 2017 Pulse of the Online Shopper study, less than a third of customers will complete a purchase if they know they have to pay for return shipping. “While it may seem like a good money-saving measure, retailers are ultimately damaging their business long term by not providing a return shipping label,” Ma said.

With many other surveys citing the importance of accuracy on delivery date promises, an expectation created in large part by Amazon, just a third of SMB ecommerce companies in the Shippo survey said they provide this for their customers. Thirty-six percent said they notify customers when the item will ship, while 63% provide the shipping cost at checkout – a figure you’d expect to be higher as failure to do so is often a cart abandonment trigger.

Ma said the fact that two-thirds of SMB merchants don’t provide delivery date promises could be attributed to three factors: A lack of technical ability to update product pages dynamically; an inability to predict actual fulfillment time; or a failure to realize how critical it is to the buyer experience, increasing consumer confidence and boosting conversions.

Not surprisingly, the cost of shipping is the biggest challenge facing smaller ecommerce companies, cited by 63% of respondents, followed by fulfillment costs (14%).

While the survey focused on merchants, Ma said Shippo is finding anecdotally from its customers that shoppers are still willing to opt for cheaper or free shipping over faster delivery (same-day or next-day). “While we see general upticks around expedited shipping around holiday deadlines, we don’t see a general increase in demand for expedited services year-round, he said.

And despite the growing focus on weekend deliveries over the holidays, with UPS and FedEx increasing Saturday deliveries and the U.S. Postal Service stepping up its Sunday routes, a little over half of the SMBs in the Shippo survey (56%) don’t provide the service. “The majority of consumers are not demanding (expedited) services and are happy to wait until the next business day,” Ma said.